There are generally three types of information required in the decision-making process within a typical organization hierarchy, namely, the operation information for the operation level, the tactical information for the mid-tier of the organization and strategic information for the top level of the organization.
The types of information required at different levels of managerial hierarchy.
- Operational information
- Tactical information
- Strategic information
Operational information regards to the daily operations of the organization and hence, is very useful in the control process over the operations that are happening on the daily basic. As such activities are normally controlled and ran by the lower levels of management, operational information is required by the lower management (Arrowsmith,James, 2013) For instance, the information with regard to the cash position on daily basis is supervised and mornitored by the lower levels of manage¬ment. Similarly, in the marketing department, the in¬formation regarding the daily and weekly sales is utilized by lower level manager to control the perform¬ance of the sales representatives. It is worth to mention that operational informa¬tion is usually regards to activities that are meant to be measured by specific standards set by the company. The operational information in majority come from the records of the current and historical performance, and is at large based on internal sources of data. The predictive nature of the operational information is relatively low, it thus has a short-term horizon. An information system that relates to this type of information is the operations support systems. Operations Support Systems (OSS) churns out a variety of information products for internal management purpose, such as processing business transactions, controlling production processes and supporting inter-company communications and collaborations effectively. They do not focus on a specific information product, further processing by management information systems however, is usually required (Abdel, A.A.T.S. & Kadir,2013)
Tactical information helps the middle level man¬agement with issues such as allocating resources and the establishment of controls to assist the top-level plans of the organisation. For instance, information about alternative sources of funds and their usages, potential opportunities for deployment of surplus resources in short- term securities, is required at the middle levels of man¬agement. The tactical information generally possesses a predictive nature while focusing on short-term trends. Such can be partly current and partly histori¬cal, and can be found from internal as well as external sources. The information system that deal with such information would be management support system and management information system. Management Information Systems and Management Support Systems produce information in the form of reports of which will then show to managers to support their daily decision-making needs. Most of the time the information is processed in a way that it will adequately meet the expectations on both operational and tactical levels of the organization, where the decision-making is usually structured and well-defined (Anon, 2014)
While the operational information is required to research on how business can be performed better, strategic information is necessary for making choices in busi¬ness options. The strategic information assists in determining and evaluating these options so that the managers can make wise choices which are better that that of the competitors and the limita¬tions of what the thy are doing. Strategic information is used by man-agers to determine goals and set up priorities, conduct new programs and initiate policies of acquisition. For instance, information about the needs of funds for on-going and possible future projects of the company in the long term can be utilized by top level managers in making decision regarding being listed in the stock market or getting loan from financial institutions. Strategic infor¬mation has a predictive trait, which makes it rely heavily on data source outside of the organization, has a long-term perspective, and is mostly summarized. It may sometimes include hypothesis. However, the strategic information is not just about external information. In the past, it was believed that strategic information refers to information only regarding the external environment. However, it is now well recognized that the information gather from the internal environment is equally crucial for suc¬cess or failures of a strategy and thus, internal information is also needed for strategic decision making. Strategic information usually appears in the following information systems:
Decision Support System (DSS) is a computer-based information system that provide information support to managers and business professionals during the decision-making process in an interactive fashion. DSS use analytical models, well-structured databases, the insights and judgments of a typical decision maker, and an interactive process to support business decisions.
Executive Information Systems (EIS) or Executive Support Systems (ESS) are information systems that incorporate most of the futures of MIS and DSS. Here the information is presented in ways specific to the preferences of the executives using the system, such as personal user interface. Each type of information has its role to play in helping to increase the effectiveness and the efficiency of the management. They are needed with different degree determined by the managers at all levels. Hence, it is natural that part of the operational information is used even by the chief executive officer of a company. The difference occurs in the proportion of the different types of information in the total information needs of management at lower, middle and top levels of the organizational hierarchy.
Decision makers access various internal and external information source to acquire necessary information to assist in the decision-making process on a daily basis (Dragan Sutevski,2013.) Such information sources include: data driven reports, analysis and advice presented at committees, and pertinent departmental or government documents.
These are the main sources where the management can obtain timely and useful information for the business.
Data-driven Reports With the aid of advance information technology nowadays, managers now draw on data and reports from software most of the time. Such software delivers a wide variety of financial and non-financial information necessary to make decisions. Unprocessed data will be entered into these programs, which then enable the management to keep track with all the available departmental information and activities. These reports can include: monthly departmental financial statements, specific liabilities reports and accounts receivable aging reports.
Analysis and Advice Presented in Committees Information for decision making can also be garnered through regularly scheduled committees such as the Financial Management Committee, and the Executive Committee. Presentations in these meetings provide the management with the context to shape policy options, which makes the early decision-making processes more convenient. Information required for decision making can be gathered from committee discussions that are recorded in the minutes. Pertinent departmental or government documents Publicly available government documents can be used to facilitate decision making process as well. These speeches delivered in the parliament and the national budget. Such documents provide the management with the knowledge of the possible and potential changes and thus opportunities for further growth of the business.
At each level of the organization hierarchy there are different desired qualities of the information they received, but in most of the cases, information that are relevant and useful shares the same traits throughout the different levels of the organizational hierarchy (Thakur, D. 2012). The following are the common desirable characteristics among each level of the organizational hierarchy.
The information the management receives is necessary to be related to the decisions the manager has to make for one to make an informed choice. An effective MIS will take data that comes from the areas of activity that concern the manager at the given time, and transform it into forms that are meaningful and useful for making decisions. If a manager needs to make a pricing decision, for instance, an MIS may take the sales figures from the past few years, and show the sales volume and profit margin for different pricing scenarios.
A key factor of the effectiveness and efficiency of an MIS is the accuracy of its information. The accuracy of the data used and the calculations that applies in the application will determine the effectiveness of the resulting information. The sources where the data were obtained will make a difference whether the information is reliable and trustworthy. Historical performance is usually part of the database for an MIS, and too often it serves as a useful measure of the accuracy and reliability of its output.
The information the management receives from an MIS may be relevant and accurate, but it will only be useful if it serves the purpose of assisting him with making a particular decision he has to make.
For instance, if a manager needs to make a decision on which employee to fire due to bad economy, information regarding the cost savings of the reduction of such employee is crucial and relevant, but information about the performance of the employees in question is much more useful and important. Therefor the MIS needs to make useful information more easily and readily accessible.
Management needs to make decisions regarding the future of the organization based on data from the current performance, especially when evaluating trends. The more recent the data, the more will the decision made reflect the current reality and the correct anticipation of the effects on the company’s performance. When the data delays its availability, one must take into consideration that this may cause potential inaccuracies due to ageing. The following trait is more important in the top-level management.
All the relevant and useful information needs to be presented for a particular decision to be made. If only part of the information is available due to missing data, it will display possible scenarios that results from the incomplete data. Management should either add the missing data or make the decisions while taking in the consideration of the missing information. An incomplete presentation of information has the possibility to lead to decisions that do not deliver the effects as anticipated. At the lower level of organization, information tends to exhibit finer granularity as peoples need to work with information in detail. At upper level of organization, the granularity of information will change and become coarser since it is summarized in some way. In fact, it can be nearly impossible for the upper management to delve from an aggregated document to find out possible issues.
Finally, the manually summaries of multiple spreadsheets may have the possibility of gross human error.
Q5. Decision making has different level of impact at each level of the organizational hierarchy (Boundless, Management, 2010) For the low level of management: Selecting the best alternatives: Decision-making process is the process of choosing the best alternatives. It is needed in any organization as there are numerous of alternatives.
Therefore decision makers needs to evaluate various pros and cons of every alternative and select the best one out of them. For the middle level of management: Implementation of managerial function: Without decision making, various managerial function, such as planning and controlling, can’t be conducted. On the other hand, when an employee does engage in decision-making, he does the work through decision making function. This is the main impact of the middle level management, implementing the strategic policies from the top level of the management. For the top level of management: Helpful in planning and policies: Policy is determined through decision making. In the process of making plans, top management needs to make appropriate decisions from the various alternatives. Therefore, decision making on the top level of management has an important impact on the planning process.
Successful operation of business: Every people, different functions of the company and organization make the decisions. In the competitive world, organization and company can only persist to exist when the correct and right decisions are made. Hence, correct decision helps in delivering successful operation of any business. For all level of managements: Evaluation of managerial performance: Decisions can evaluate the managerial performance. When decision is made correctly, it is understood that the manager is qualified, capable and efficient. When the decision is wrong, it is understood that the manager is disqualified. This is why decision making is able to evaluate the managerial performance.